M2 Money Supply To GDP Ratio In Muslim Countries Less Than 50 Pct

KUALA LUMPUR, March 22 (Bernama) -- The ratio of the M2 money supply to the gross domestic product (GDP) ratio in Muslim countries stood at less than 50 per cent, limiting the availability of financing offerings. Indonesia’s former Trade Minister Gita Irawan Wirjawan said the M2 to GDP ratio, especially within Southeast Asia, was much lower compared to developed countries with more than 100 per cent. “So, at a time when we should be talking about increasing financial inclusion for millions of people in developing countries, when in the end the M2 to the GDP ratio is less than 50 per cent, there is a limit at which or to which you can increase financial inclusion,’’ he said at Maybank Islamic Bhd’s virtual Global Connect Forum. The M2 is a measure of the money supply that includes cash, chequing deposits, and easily-convertible near money and is a broader measure of the money supply than M1, which includes just cash and chequing deposits. Gita said it's high time for regulators, even those in developed countries, to understand the exponential reality of technological innovation to close the gap moving forward. Concurring with him, the funding trustee at RFI Foundation Daud Vicary Abdullah said that there is a phenomenal regulatory gap in addressing those issues. “The opportunities that digitalisation brings and the concept of shariah-compliant finance would (lead) to wanting to move away from reserve-type currencies, fiat-type money that drags everybody back into conventional financing,” he said. “Whilst many of the thinkers in Islamic finance see blockchain as enormously helpful than the concept of bitcoin and an opportunity to move away from fiat money, the challenge or the resistance perhaps is coming from the regulatory standpoint.” -- BERNAMA